Savings Explained
Is there anything I need to watch out for when choosing
a savings account?
Minimum
deposits
Some savings accounts require a minimum deposit. So, you can only take them out
if you have enough money to meet the deposit conditions.
Generally speaking,
fixed rate bonds,
offshore accounts
and
guaranteed equity bonds
have high minimums, in some instances £10,000 or more, but a number
notice
and
easy access accounts
are also ask for minimum deposits.
Traditionally, the bigger the balance, the higher the interest rate, but this is
no longer the case. Many of the highest-paying easy access accounts are available
on balances of £1 or more.
Short
term bonuses
Traditionally, the bigger the balance, the higher the interest rate, but this is
no longer the case
One other thing to be aware of is that many banks and building societies offer headline
interest rates that include short-term bonuses that apply for the first six or 12
months.
If you opt for an account of this kind, you will therefore have to switch accounts
once the bonus period ends to ensure you are getting the best rate over the longer
term.
Withdrawal
restrictions
As mentioned above, some savings accounts also carry withdrawal restrictions. You
may only be able to make a certain number of withdrawals in a 12-month period, or
you may receive no interest in the months you withdraw cash.
This is worth noting as it can have a significant impact on the amount of interest
you receive over the course of a year.
Many banks and building societies offer headline interest rates that include short-term
bonuses
If, for example, you had £5,000 in a top savings account paying around 6%, just
one withdrawal in the twelfth month would cost you about £20 in interest and would
reduce the actual rate you receive by about 0.5%.
Linked
Accounts
There are also some savings accounts that you can only take out if you have another
account with the same bank or building society.
Continue to Page 7 to What is a dormant account? >>
